Getting your strategy right – 1. Negative Gearing

In our last Everyday Property Foundations series post we talked about knowing your endgame. So I’m going to assume at this point that you’ve considered your overall goal – including the amount of money you’re going to require and the timeframe in which you intend to achieve your goals.

In the ‘Getting your strategy right’ section of the foundation series we’re going to introduce a number of ways or strategies that you may want to consider for investing in property. Today’s post is about negative gearing – and that’s because for the majority of investors their investment property will be negatively geared. So let’s look at what negative gearing is and the pros and cons of negative gearing.

What is Negative Gearing

The Australian Tax Office (ATO) says:
“A rental property is negatively geared if it is purchased with the assistance of borrowed funds and the net rental income, after deducting other expenses, is less than the interest on the borrowings.”  (ATO Website, Accessed 9th July, 2012).

The ATO also tells us that your may be able to claim a deduction for the resulting loss from the property against your rental and other income.

So basically, it comes to down to this:

  • You buy a property
  • The expenses from the property exceed the income from the property
  • You are making a loss
  • This loss can be used to offset other taxable income, such as that from your wages/salary as well as your rental income

The Advantages of Negative Gearing

On the ‘pros’ side, negative gearing is good because it helps you to reduce your taxable income, which means you pay less tax.  Many high income earners use negative gearing for this purpose.  Also, property values often (not always) rise over time and this capital growth in the property can be more than the losses and inflation so you may end up in front in the long run.

 

The Disadvantages of Negative Gearing

On the ‘cons’ side of the equation, however, you need to remember that if your property is negatively geared then you are making a loss, which means money is coming out of your pocket each month to pay for the property.  Depending on your circumstances this may impact upon your lifestyle as you will need to use your funds to service the loan and expenses.  When a property runs at a loss this also means there is only so much ‘extra’ income that you have available and so at some point, you will be limited in your ability to buy more properties.

Why would you use negative gearing?

Now many people would think – why would you buy property that makes a loss?  Why would you use negative gearing?  For a lot of people, they just can’t get past the idea of buying something that makes a loss – on purpose – and so they focus on property that is positively geared or has positive cashflow (we’ll cover those in the next article).

The main rationale is that the capital growth in the property you purchase may well outweigh the losses plus inflation over time and all the while you are reducing amount of tax you pay.

Summary

Negative gearing is where the expenses related to your rental property exceed the income and you have a loss where you may be able to claim a tax deduction.

Pro

  • Reduction in overall tax paid

Cons

  • The property is incurring a loss that you must fund out of your own pocket
  • May impact upon your lifestyle
  • Can only buy so many of these before you can no longer afford to buy further properties

What do I think?

If you are going to have a negatively geared property then it should be for the right reasons and simply to reduce tax is not the right reason.

Make sure you do your research to ensure the property you are selecting is in the right location and offers the factors that you believe will provide significant capital growth over time.  This is the right reason, the tax reduction is just a by-product.

Also, look at ways to improve the cashflow of your property, for example, undertaking a renovation to increase the yield of the property as well as increase depreciation benefits.

Four Property Investing Strategies for bigger profits

 

 

There are more ways to make money in property than most people realise.

Many property investors, like myself, concentrate on one or two property investment strategies. Most portfolios are negatively geared, positively geared (or positive cash-flow) or a mixture of the two. If you’re an enthusiastic investor, and you have a little time, you might be interested to find out a little more about some alternative (and a little more advanced) investment strategies.

You’ve probably already heard of some of these strategies, such as renovation and development. The average investor feels as though these are strategies that “other people” do. It’s always worth keeping these strategies in mind, and here’s why.

1. Renovating

The Complete Renovation SystemA good renovation to the right property can increase its value by thousands. It can turn a dud property into a shining star. It can turn an otherwise ordinary yielding property into a positive cash-flow gem.

Renovating can be far more than splashing a coat of paint on a wall or covering a chair in some nice fabric. Knocking down walls, adding rooms, building up, building out… There’s a big difference between what you might be comfortable doing, and what you can get an expert to do.

Whether you choose to do a light (D.I.Y) renovation, or get the experts in, renovation for investment is strictly a numbers game. It’s critical that you plan well and assess the feasibility of the project before you even buy the house. You need to manage your budget carefully and know your costs. There are great packages that can guide you through the process and it can be worth investing in one, especially if you plan on renovating more than once.  Check out Kaz’s review of  The Complete Renovation System – the system she used for her recent renovation!

As I said, a good renovation to the right property can do wonders. But a bad renovation, or even a good renovation to the wrong property can be a sure way to throw your money away. Do your homework first!

2. Property development

Property development is almost the next step for an experienced renovator. If you’re considering property development as a strategy, you can leave your options open by focusing on buying investment properties on large (especially corner) blocks. This leaves you two options:

a. Keep the existing dwelling, earn some rental income along the way and build a second property on the block

b. Knock down the existing property and build a number of dwellings on the block

A great way to learn about property development is to find a mentor who has developed property before. Ask a lot of questions! Remember, also, that property development takes time so you will need to be able to cover shortfalls in your cash-flow for two or three years.

Development is a strategy which can give great rewards. Coupled with these rewards are higher risks and a more hands-on approach. This is definitely a strategy where you need to plan well, educate yourself, consult with experts and budget well.

Make sure your checkout our podcast episodes 25, 26 and 27 which feature interviews with Troy Harris, property developer from Rookie Developer.

3. Vendor financing

Vendor financing often comes into play when the purchaser cannot obtain finance through conventional means. The vendor essentially becomes the lending institution. The vendor and the purchaser come to a financial arrangement that is mutually beneficial and enables the buyer to buy the property and the vendor to provide a financial arrangement that yields a profit for them also.

This is clearly a strategy where all the legalities need to be sorted out. If you’re considering entering into such an arrangement, you’ll need a sound team including an accountant, lawyer and possibly a broker. Make sure they all have experience in vendor financing, and make sure you cover yourself in every possible eventuality.

When it works, vendor financing provides a win-win for both the purchaser and the vendor. When it doesn’t it’s a mess.

4. Flipping

Flipping is the rapid sale of a property, prior to the settlement period expiring. The big advantage of flipping is that the purchaser may make a lot of money in very little time, with very little outlay. Only the deposit for the property needs to be provided as it is never actually owned by the purchaser, and at the right sale price the vendor can potentially make a significant amount of money.

Flipping is one of the less conventional and probably more risky strategies. Expert flippers make good money without putting a lot of money down. If the flipper, however, is unable to sell at a profit then one of two things will happen:

a. They may find themselves being forced to take out full ownership of the property. This can severely limit their cash-flow, or put them under a lot of financial stress

b. They are forced to sell at a loss

Again, when it works, there’s a lot of money to be made. But when it doesn’t, it can put the flipper in a very difficult situation.

Educate yourself

Every property investor needs to be aware of the options that they can take. Of course, not every strategy is right for you and it’s important to be comfortable with the decisions you make. If a new option interests you, do your research and get educated.

And good luck with your property investing.

Property Investing – is reducing tax what it’s all about?

Negative gearing - tax

 

There is only one way you can ensure your property makes you money – ensure it brings in the dollars from Day 1.

If your property does not make money from the start then you’re speculating on something changing:

  • Values increasing
  • Interest rates decreasing
  • Rents increasing,
  • Or a combination of the the above!

Property is quoted as showing an average annual appreciation of anywhere from 6% to 10%.

In a seven-year cycle, however, there are normally only two or three years in which properties significantly increase in value.  For the other five years you generally find prices are pretty stagnant. This doesn’t mean property won’t go up in value, it just means you can’t always count on it.

This is only bad news for the investor who is choosing a negative gearing strategy. Those choosing negative gearing often do so to reduce the tax they pay.  To make negative gearing work, you need to be sure your property is going to increase in value (and you can only speculate when or if that will happen!).

Tax reduction can be great but not if it means you have to speculate!

Last week I heard a commercial on the radio advertising “tax reduction through property investing”.  Now I’m no accountant but I do know the general rule that if you’re paying less tax, you’re bringing home less money.  The sales pitch was to buy a property that “will go up in value” which sounds great, if you can be sure it will (and let’s be honest, not every property has increased in value in the past three years!).  In the meantime, your property will lose you money and you will pay less tax. Frankly, I just don’t get it. Why would I invest in a property knowing I would lose money?  The ad left me scratching my head.

Then I thought about other investments.  How many share traders would choose to buy a stock on the promise that it would lose them money and therefore reduce their tax bill?

Would you throw your hard-earned dollars into a bank knowing that you’d get less back? Nope, nor would I. Nevertheless, it seems that so many property investors are keen on negative gearing. Keep in mind, also, that selling the property for a profit will also attract capital gains tax.

Negatively geared properties can be very successful investments, provided that there is good capital growth over time to well and truly offset your losses – but to negatively gear purely to save tax, well, you might want to think it through.

I generally choose to invest in positive cash-flow property. Positive cash-flow properties are harder to find so I spend more time searching and carefully do my sums. I know that I will profit from my investments from the outset and I’m not relying on capital growth.

You can do the same and, really, it’s not that hard. It just takes a little more time.  And it takes the guesswork out of successful investing!

EPI 012 | 7 tips for making 2011 your most successful year in property

SUBSCRIBE in iTunes: iTunes Store – Everyday Property Investing (NB: Need to have iTunes installed)

Wow, the start of another year and a perfect opportunity to set your property goals!

In this episode’s feature segment we give you 7 tips on how to make 2011 your most successful year for property investment.   Of course, being the start of a new year, we talk about setting your property goals and we share our property goals and offer some tips on recording and tracking goals.

We have a great listener question from Steve as well as our quick tips and actions for you to take from this episode.

Key points we talk about:

  • Setting property goals and actions and tracking these
  • Increasing your knowledge about property investing
  • Getting involved in the property investing community
  • Setting up accountability
  • Stepping outside your comfort zone!
  • Property development, renovation, negative gearing and positive cashflow property investment.

Things we mention:
www.43things.com – goal setting website
www.meetup.com – find other like minded people in your area
Den’s tracking tools

Actions:

  • Write down your goals
  • Send them to us at comments@everydaypropertyinvesting.com!

View the transcript here (Coming Soon)

Property Investment Jargon and Terminology Explained

australian property investing

One of the things that makes learning about property investing (or any topic for that matter) so daunting can be the barrier to understanding that occurs where jargon and terms are used with which we are unfamiliar. Let’s try to clarify a few of those terms that you will see when reading about property investment or listening to others speaking about property investment.

Capital Gain
Residential Property Investing - Capital gain The amount by which a property increases in value relative to the amount for which is was purchased. So as an example if you bought a house for $150,000 in 1995 and now the house is valued at $650,000 then your capital gain is $500,000 (well done, you!).
Capital Gains Tax (CGT)
Residential property investment - capital gains tax Yes, so just when you were thinking up all of the ways you would spend your $500k capital gain we made in the previous example, CGT comes along and grabs part of your profit! CGT is the tax that you pay when you something that has made a capital gain. It gets included in your income tax return. In regard to property investment we’re talking about the tax you pay on any capital gain that you make when you sell a property. Your principal place of residence has an exemption from CGT, however, there are specific rules around this that you should consult a tax advisor about if you need to know more.
Cashflow positive
Residential property investment - Cashflow positive Ahhh, I love these words! Your investment property is cashflow positive if your income from this property is greater than your outgoings after you’ve taken into account tax deductions. Tax deductions include things like interest paid on your loan, depreciation, maintenance and service costs.
Depreciation
Residential property investment - depreciation This is the decrease in value of an item over time. The easiest example of a depreciating asset is your car, one minute you’ve just purchased a brand new shiny number and driven it off the car sales lot, the next minute you own a second hand that’s worth a whole lot less than you paid for it! Now when it comes to investment properties depreciation can be your friend, because you are allowed to claim against the depreciation of your investment property. Once again there are some particular rules around this so you should speak to your accountant or a qualified depreciation specialist. There are many companies around who can help you.
Equity
Residential property investment - Equity This is the degree or proportion of ownership that you have in something. In the case of property, it’s how much of the property you own. So if you have a property that is worth $200,000, of which you still owe $120,000 then you would have $80,000 or 40% equity. Equity is a very good thing to have as it can be used to leverage into further property purchases!
LVR (Loan to value ratio)
Residential property investment - Loan to value ratio This acronym stands for loan to value ratio and it pretty much means just what it says! It is the proportion of a property (or a property portfolio) that you own in relation to it’s overall value. So in the case of our home worth $200,000 where we still owe $120,000 then our LVR for this property is 60%. Banks look at LVR in order to determine if you can afford a loan. As a rough guide, banks like you keep your LVR at a maximum of 80%, beyond which they want to insure themselves by getting you to pay mortgage insurance – more on that next!
Mortgage Insurance
Residential property investment - Mortgage insurance This is insurance that banks get you to pay where your LVR will be greater than 80%. Now the thing to remember here is that mortgage insurance is also referred to as ‘lenders mortgage insurance’, so it is insuring the lender against you defaulting. It doesn’t provide any sort of insurance for you and can cost a good whack of dollars, so be careful!
Negative Gearing
Residential property investment - negative gearing When an investment, such as your investment property earns you less than your outgoing costs associated with the property after all tax deducations are taken into consideration then that property is negatively geared. Negative gearing is used as an investment strategy by many high income earners as it effectively reduces their taxable income and also scores them a property that is hopefully going to grow in value. The thing to remember here is that you are losing money each month on this property which means you need to make up that shortfall from your own pocket.
Positive Gearing
Residential property investment - positive gearing The opposite of negative gearing, positive gearing is where the income from a property exceeds the expenses. This means you are making money on the property. Some people use the terms positive gearing and positive cashflow to mean the same thing, however, at we differentiate between positive gearing and positive cashflow property. Positive cashflow property returns a positive cashflow after tax deductions are taken into account, whereas positively geared property returns an income regardless of tax deductions. Making money is a great thing, but do keep in mind that you will need to pay tax on your income.
Rental Yield
Residential property investment - rental yield The rental yield is the return on investment as a percentage of the amount that you’ve invested. Gross rental yield = ((weekly rent x 52)/Property value)*100. So as an example here if your $200,000 property was getting $280 per week then the rental yield would be 7.28%.
Serviceability
Residential property investment - serviceability This relates to your own personal income/cashflow and is taken into account by banks, in conjunction with your LVR, in determining suitability for a loan.
Stamp Duty
Residential property investment - stamp duty This is a state government tax that is applied to the transfer of property and really is a massive cost consideration when purchasing a property. As an example, at the time of writing this, in the state of Victoria, Australia, if you were to purchase an investment property for $300,000 then you would need to pay a whopping $13,070. No getting around it though…!

So there you have it, not a complete list as we could go forever, but enough to get you started! Remember, knowledge is power, so work on increasing your property investment knowledge and it will pay off for you!

EPI 007 | What you need to know about negative gearing

iTunes Store – Everyday Property Investing (NB: Need to have iTunes installed)

In this episode we delve into negative gearing, looking at the pros and the cons of one of the most popular investment strategies around.

We have a listener question from Steph who asks whether she should jump in and get started or save more money to afford an inner city property.

And in our quick tip we suggest you check out the website of your tax office (in Australia – www.ato.gov.au)

Actions:

  • Learn what your tax bracket is and how much tax you pay

EPI007 | What you need to know about negative gearing

Introduction

This is Everyday Property Investing episode 7. The show empowering everyday people to create wealth and achieve financial freedom, so get on board! Everyone can be a property investor! It just takes a little knowledge, a little support and some action. So get started with us today!

Welcome

Kaz: Hello and welcome! I’m Kaz and this is episode seven of Every Property Investing – lucky seven! In this episode we’re going to find out all about negative gearing. We’re going to talk about what it is and what are the pros and cons of negative gearing. And in this episode’s Quick Tip we’ll find where to go to learn about your taxable income and your tax bracket. I’m here with Den and we’re here to help you develop your knowledge and ours and to share our experiences within our Everyday Property Investing community. So how’s it going Den?

Den: I’m great thanks Kaz, and yourself?

Kaz: I’m very well, thank you!

Den: Outstanding! Now Kaz what’s news with you this week?

What’s news

Kaz: Well this week, I went to the accountant. It’s the time of year again or it was several months ago and I’m just a little bit late to do tax returns. But while I was there I was actually asking my accountant questions, which I recommend everyone should do actually. Make sure you get your big list of questions that you’ve always wanted to ask accountants.

Den: Any questions or actually specific property questions?

Kaz: I actually ask just, well I only see the accountant now and again. I come up with a list of anything to do with anything that I want to know because I figure I’m getting the money out and I want the most out of my money for the visit.

Den: Fantastic

Kaz: So I asked this accountant all about buying property in your own name versus buying property in a trust or a company structure. Interestingly what I found was that:

  • Number one you should consult an accountant to find out that sort of information because boy, it gets complex.
  • Number two, is to actually make sure that the accountant you are speaking to is someone who understands that sort of stuff, because property investing is actually, accounting is a big realm and some accountants know things about company, business, and others know things about property, and others know things about commercial arrangements for retail organizations or whatever. So try and find someone who actually knows a lot about that specific area. So that’s my tip there. It’s a complex area and but there are different ways to buy property and you should visit your accountant to talk about what the best way is for you.

Den: Okay, so trip to the accountant for you

Kaz: Yes, that’s a long-winded story, what about you Den?

Den: Alright, for me this week, as you may know if you’ve been following through, we’re looking at selling one of our properties. I tried the cheap man’s way of selling without having to pay for marketing or anything like that. What I tried to do is get the real estate agent to go through their email list and look at people who were interested in certain properties and fire off emails. The news this week is that it hasn’t worked. We got one offer which was considerably under what we wanted, and not being desperate to sell of course we don’t have to accept it. So now we’re looking at putting together an entire marketing plan and how we’re going to manage to sell this property and all that sort of stuff. So I’ve had some very slick real estate agents who have far too much hair and makeup, speaking to me about how they’re going to put together a marvelous marketing plan that’s going to get billions of dollars for this property – or that’s what it feels like.

Kaz: And how much does it cost you the billion dollar marketing plan?

Den: Well the marketing plan seems to be in the vicinity of $2,000 to $3,000 for a property. So I suppose if they can get an extra $2,000 to $3,000 for the property, then it’s worthwhile. So you’ve got to go with someone and now it’s down to choosing who’s going to run this marketing plan.

Kaz: It will be really interesting episode for us to do actually, sometime Den, about selling a property and all the costs associated with it, and what you can bargain on, what you can expect to pay for certain parts of it.

Den: Yeah absolutely, I think you find that there are some certain standards for the industry, but I wish someone, somewhere had put together how to pick your real estate agent when you’re selling your property. Maybe it’s something we have to do when we’ve done it a couple of times because I have got no idea how to do it. I’m just using my best judgment.

Kaz: And did you interview a bunch of different ones?

Den: Yeah I did

Kaz: I think you mentioned that.

Den: Yeah I listed questions and I sat down I don’t know how many cafe-lattes I bought to sit down and try to interview these agents and I still don’t feel great about it.

Kaz: Oh okay, well I’ll be interested if it works to find out how the marketing plan goes, and the women with too much makeup.

Den: So will I.

Feature Segment

Den: Okay now, our feature segment of this podcast is about negative gearing and what you need to know about negative gearing. So Kaz I know negative gearing is a really popular investment strategy, in fact it’s probably the most popular investing strategy. So tell me, what is negative gearing?

Kaz: Basically Den it boils down to this. You buy a property and the cash outflow from that property in terms of the expenses, exceed the income from the property. Therefore you’re making a loss on that property, but that loss can then be used to offset other taxable incomes such as a wage or salary and that reduces your income tax.

Den: Ok, so hang on, I just want to get this clear. So negative gearing is about deliberately making a loss on property.

Kaz: Yeah pretty much.

Den: Ok. So you do that because if you make a loss you’re going to pay less tax?

Kaz: That’s right. A lot of people, particularly in high-income brackets, look at this as a strategy of reducing their income tax.

Den: Ok, so negative gearing is really a tax reduction strategy?

Kaz: Yes

Den: Ok

Kaz: However there are other potential pros to negative gearing?

Den: Yeah

Kaz: Other than just making a savings on tax which make it appealing.

Den: Ok

Kaz: And that would be that property values often rise overtime. Therefore we have a capital gain. So this is particularly good if you purchase a property which increases in value over time, and that increase in value is greater than after tax losses and inflation then you’re ahead of the game.

Den: Ok, alright. So your pros are about your income tax. Your pros are about getting a property that rises in value overtime, so if your rise in value beats your income tax you’re fine. Ok, now I want to talk a little bit about why properties that generally rise in value overtime more, and maybe make your loss seem to be better capital gains.

Kaz: Good idea

Den: So, let’s talk about this. Not every property will give you the same yield and therefore not every property will give you a capital gain or a capital loss; they are different. What generally happens is property values are generally related more to the land than to the building. So when there’s a new house sure there’s value in the building.

We talked last episode about depreciation, and over time property values have been more linked to the land they’re on than the building. So let’s consider an inner city property. Now these properties are generally on blocks of land which are highly sought after, so they’ll have a high value. Now that value will probably go up over time, you’d expect it to because the demand for inner city properties is quite high. Now on the other hand, rent is generally related to the house itself and the type of property. So the rent factor isn’t all about the size of land. But it’s about how many bedrooms, how many bathrooms, how well-appointed is the house. So, what you might find is an equal house near the city will get better rent than a house further out, but the land further out is worth far less. So, you’ll find that the yield on a place further out of town is probably better because the house costs less. Now, that means that the properties in near town will generally go up more but they won’t get as much rent relative to a property further out and therefore you’re looking at making a loss. But your capital gains will probably, not always, but probably be better.

Kaz: So Den, you’re saying then that an inner city property is probably more likely to have greater capital gains, but less yield?

Den: Ok. I think well yes, probably yes. Now there are a whole lot of factors obviously involved. And it comes down to demand, and it comes down to infrastructure, and a whole lot of these factors that I know we’ve now got a report on the website that we’ll go through. But your chance of a property going up in value is related to quite a few factors and one of them is the demand for that land. So if you have a property near a center, there’s a chance that it will have a higher push to go up than a property away from the center.

Kaz: Ok and so, with negative gearing then, we’re looking at saving in income tax but we’re hoping that our property will gain or have a great capital gain?

Den: Ok that’s right. So often you’ll hear people say, I invest in property because I’m going to make money it’s going to go up in value. And I know I recently had a conversation with a friend of mine who’s bought her first investment property and this is a negative gearing property. And she spoke to me about it and said, ok this is why I’m doing it, I’m going to buy this property, I’m going to keep it for a while, and I’m eventually going to sell it and I’m going to make heaps and heaps of money out of it because it’s going to go up. Now of course, no capital gain is guaranteed. You don’t know what the prices are going to be in ten or fifteen years time. But there are certain amounts of research and certain considerations you can make that will increase your chances of it becoming a positive investment for you.

Kaz: Now here’s a question for you Den. There’s a bit of a, is it a myth or is it fact that I often read how property values double every seven to ten years. What do you think about that statement?

Den: Well again, I’m not the expert. But all I can talk about is what I’ve read. If you look over time, you’ll find that there is a rough increase, something like that. I think what’s known is that property values overtime do go up. If I look at my portfolio, and I do a statistical analysis on my portfolio regularly, the portfolio over the last ten years on average in the areas that I’ve invested has gone up 10%, right, per year on average. So, if that’s the case then the portfolio doubles about every seven years if it goes up 10% per annum, because it compounds. So, you’re probably looking at seven to ten years that’s a reasonable sort of an estimate, some areas will go slower, some areas will go faster, some areas will have growth spurts and all that sort of stuff.

Kaz: So by no means is that a fact that that’s going to happen, so people can’t be guaranteed of that coming.

Den: It’s not a fact and if you buy a property for $500,000 right now, and you have in your plans that you’re going to sell it for a million dollars in seven years time, I think you’re taking a big risk.

Kaz: Fair enough

Den: Ok

Kaz: So with this negative gearing thing Den, it’s sounding pretty good; I’m saving on tax, I’m buying a house that could potentially double in many years time, so that sounds great and that’s the upside of it. What about the cons of negative gearing?

Den: Well look, I think there are obvious reasons. A lot of people are investing in negative gearing, and it’s a very tax advantageous way to invest. But ultimately you’re making a loss. And I think it doesn’t matter which way you look at it even if you’re saving paying tax, you’re making a loss. And if you make money, you pay more tax. If you lose money, you pay less tax. So if you’re happy with making a loss that’s fine. But what making a loss also means as an impact is you can’t invest in a whole lot of properties at the same time, because there’s going to be a limit to how much loss you can make and how much loss you can handle. So it limits your ability to buy a lot of properties. It limits the extra income you have available now because you do have some money going out that essentially you could be using somewhere else although you are investing, so you’ve got to think about it that way. So that can impact the lifestyle that you lead.

Kaz: So if I’m, say I buy a property and it’s taking, I buy this as an investment and it’s negatively geared, and it’s taking say $500 a month from my pocket as well as there’s rent coming in from a tenant but that’s not enough to cover the expenses. So it’s taking $500 a month from my pocket and then I’m going to buy another one that’s the same, so there’s another $500 suddenly I’m up for an extra $1000 a month from my pocket, so there’s sort of a, there’s a limit to what you can, the extra money that you can have.

Den: There’s a limit…look in every type of investing and this is where, I think the obvious next question is, what’s the best one and the answer is what do you want. But I think clearly the idea of having a large number of properties that are each losing $500 a month isn’t going to work for most people. So, you need to have that background, you need to have done your research, you need to know that you’re on a pretty good thing and you need to feel comfortable with it. Now, some people love negative gearing, they love reducing their tax. Other people love positive gearing or positive cashflow because it gives them money every week, they’re not making a loss. It really is up to the individual to decide, to speak to their accountant, to speak to the people that are important and to make sure they are comfortable with this strategy. So when you start wondering, as I say the obvious next question is what’s the best, that’s a really hard question to answer.

Kaz: Ok fair enough. And I just wanted to sort of, give you a bit of an example here, when I first started looking to invest and we spoke to a few different investment companies, and I wanted to have a large portfolio of lots of properties in it. And so I remember talking to a representative of a company who came up to our house, came up the driveway and came in and we had a discussion about the property we were going to buy, what we could afford and all this sort of stuff. And she was basically saying that they actually, this company I was talking to, actually sell property as well which is number one for me is a little warning bell because you don’t, don’t want to mix up it’s a little bit conflict of interest getting property investing advice.

Den: Well that’s my number one. My number one thing is never take property investment advice from someone who wants to sell you a property. Now maybe, I’m being a little bit harsh there but I’ll make that rule for myself. You make your own decision. I make that rule for myself.

Kaz: No, we pretty much went the same way because I remember talking to this girl and saying that, well I want to have multiple properties, and she saying we only sell in inner city high growth areas and you could buy this house or this house and started showing me some houses, and I said that’s great but that house would be negatively geared and I would be out of pocket, 500 or more dollars a month for that house how am I going to afford lots of properties. And she said don’t worry lots of our club customers have lots of properties! But it didn’t really answer my question of how would I be able to afford multiple negatively geared properties.

Den: Well, if you want multiple properties and you want to grow your portfolio quickly, having a lot of negatively geared properties is probably going to limit that. So it’s just, again these are the considerations you need to make and I know that in future podcasts we’re going to go into how you work these things and how you work around these things. But from the beginning, it’s really hard to see how making a $500 loss per property is going to enable you to buy a dozen, fifteen, twenty properties.

Kaz: Yep and some people actually choose to combine negative gearing with other positive gearing or positive cashflows, then may have three or four positively geared or cashflow properties that are funding one negatively geared one in the hope that the negatively geared one will grow substantially.

Den: Yeah exactly. So the big thing is negative gearing it’s the sort of investment strategy someone would use if they’re looking at buying property that is expected to go up significantly in value while reducing their tax. So they’re making a profit from the property going up and at the same time they’re paying less tax in the meantime.

Kaz: And perhaps also for people who were looking at purchasing or just interested in having one or two properties that were going to grow that weren’t necessarily involved or as interested in having twenty properties.

(Music)

Listener Question

Kaz: So now we’ve got a listener question that’s been sent to us from Steph from Geelong.

Den: Hi Steph

Kaz: Hi Steph, thanks for sending us question we love them, please send more in everyone comments@everydaypropertyinvesting.com. Anyway back to Steph. Steph from Geelong says, ‘Hi Kaz and Den, thanks for the podcast. I’ve been listening on the way to work in the car. I want to start investing as soon as possible and have a small deposit available. I’ve been talking to people and some say just buy what you can afford whereas others say that you should only buy inner city properties as they grow more. Just wondering what your thoughts are.’ Thanks, Steph. Well how relevant was that to our discussion today.

Den: You’re going to ask me to answer this aren’t you?

Kaz: Yes, of course Den!

Den: Alright Steph, once again it comes down to your overall strategy. You need to decide what you want to do. Now if you have a small deposit, and I don’t know how much it is. If you’ve got a small deposit saved, there’s probably a limited chance that you’ll be able to buy an inner city property. So you’re balancing out how big is your deposit with what can you afford. And you also say you want to start investing as soon as possible. So there’s a few factors here. If you want to start investing as soon as possible, you probably going to get something that’s relatively cheap. If you want to buy an inner city property, that’s probably going to be more expensive. So you need to make that decision yourself. Remember we’re not financial advisers, we don’t know what your specific situation is. But you need to decide what the bigger driving force is. Is it about investing as soon as possible? Or is it about getting a place near the city? And that will ultimately help you decide what you would do.

Quick Tip

Kaz: Okay our Quick Tip for today, we’ve spoken about negative gearing today, so we were thinking a good tip for you may be to go and check out the ATO website, which is the Australian Tax Office if you’re in Australia that is. If you’re in another country, check out the website of the tax office of your country and have a look at the various income tax rates, and work out how much tax you actually pay, what tax brackets you fall into and understand how income tax works in your country and in your area, because that’s a really, that’s a big factor in your life and in your investing comes down to income tax rates. So a good understanding of that will do you well. The other thing is, often on those websites including the ATO website; they have a simple and an advanced calculator to help you work those things out on the website. There’s often a lot of really good resources on the website of the ATO and you can learn all about taxation there.

Den: Yeah and the one thing that we’ve been talking about with negative gearing is, if you don’t know how much tax you pay. You don’t know how much tax you’ll be saving if you negative gear, so it’s really important to do that, which brings us to this week’s action. And this week’s action is to make a point to go and learn about income tax in your tax brackets and understand exactly how much tax you pay.

(Music)

Den: Okay next episode, we’ll be going through positive gearing and positive cashflow as investment strategies. We’ll be understanding what positive gearing and positive cashflow means and looking at the pros and cons of them. As always you can email your comments to comments@everydaypropertyinvesting.com. We’ll also have our usual segments including news and tips so get over to iTunes and subscribe to our podcasts.

Kaz: And don’t forget to head on over to the website www.everydaypropertyinvesting.com and sign up for the email newsletter and we’ll give you notifications of when new podcasts are available.

Den: Alright, until then!

Closing

You’ve been listening to Everyday Property Investing, the show empowering everyday people to create wealth and achieve financial freedom. Please note that this show provides general advice based on personal experiences and is for educational purposes only. We’re not qualified accountants or lawyers or licensed to provide professional financial advice for you. We strongly advise that you employ the services of qualified professionals and seek their advice that is specific to your own personal circumstances. You can visit us at www.everydaypropertyinvesting.com. See you next time!

EPI 006 | Property Investing Jargon Exposed

SUBSCRIBE in iTunes: iTunes Store – Everyday Property Investing (NB: Need to have iTunes installed)

In this episode we explain common property investing jargon, including:

  • Negative gearing
  • Positive gearing
  • Depreciation
  • Section 32
  • Capital Gains Tax
  • Vendor Finance
  • Equity
  • and more!

And in our quick tip:

  • Where to find a good explanation of property terms
  • How to keep track of tricky terms

Actions:

  • Get a property magazine and highlight terms that you don’t understand
  • Make a point of finding out what those terms mean and recording them in your property notebook

Property Investing Jargon Exposed – Podcast Episode EPI 006

Introduction

This is Everyday Property Investing episode 6.  The show empowering everyday people to create wealth and financial freedom, so get on board! Anyone can be a property investor!  It just takes a little knowledge, a little support and some action. So get started with us today!

Welcome

Den: Hello and welcome I’m Den, and this is episode six of everyday property investing. In this episode, we’re going to cover property investment terms and definitions so that you can understand all of property investing jargon. We’ll be covering things like negative gearing, positive gearing, capital gains tax, depreciation and much more. And in this episode’s quick tip, we’ll tell you where you can easily find the answers to some of your property definition questions. I’m here with Kaz, and we’re here to help you develop your knowledge and ours, and to share our experiences within our everyday property investing community. How’s it going Kaz?

Kaz: Really good, thanks Den. I’m fantastic, how are you?

What’s news

Den: Great, thanks. So Kaz what’s news with you?

Kaz: Oh, we’ve had some exciting news this week Den – I’ve been dying to tell you all about this.

Den: Tell us, tell us.

Kaz: You know how the last few episodes I’ve talked about how we had a property, and it looked as though we could potentially develop from the back of that property. We went ahead and got some plans from the council and sent them off to a drafting company. And the drafting company came back to us just this week actually and said, yes, yes you can fit something on the back of that so we’re now property developers.

Den: So you’re about to become a property developer?

Kaz: I’m very excited to say that yes I am about to become a property developer!

Den: Fantastic. So now you’ve got the approval, do you have any idea what the next step is?

Kaz: I do have a bit of an idea, funnily enough. Our first step that we want to do is to do feasibility study because the drafting company came back to us and said yes look you could fit a one bedroom unit on it or two bedroom unit with a bit of squashing, and I sort of thought well actually I’d like to fit a three bedroom two-storey on the same property if we can. And they said yeah that’s okay – you tell us what you want and we’ll make it. So it’s up to me now to try and work out what’s going to be financially viable. As in you know, is it worth the effort and the extra money involved to build a two-storey, three-bedroom town house, as opposed to, to building a two bedroom single-storey unit? So what are the pros and cons so we need to do a feasibility study!

Den: Fantastic.

Kaz: So yeah, that’s the first step. And it’s actually been interesting because it seems straightforward to say OK I’m just going to calculate the expenses and the cost of things but if you’ve not done something before sometimes it’s hard to estimate what those cost might be…

Den: Absolutely, I completely understand.

Kaz: I’ve been reading some books about it and I’ve got my spreadsheet ready. And I’m actually going to speak to a friend of mine who has done a lot of property investing – his full-time occupation is as a property developer. So he’s actually going to help me out with my feasibility study.

Den: Fantastic.

Kaz: What about you Den, what’s happening with you?

Den: Well, we had some probably not as good news as you had. One of our tenants has fallen behind in the rent, and they’ve fallen behind in the rent not by just one or two weeks, but they’re more than a month behind now. So I’ve been chasing up my property manager, who’s been chasing up the tenant. We’ve tried to put in place a payment plan for the tenant to get back on track. One of the things that I’m really big on is trying to work with the tenants to make sure everything’s ok. Now it’s, it’s something that I really hate when the tenant runs late and you find out because money doesn’t go into the account. I’d much rather attempt to get in touch and say we’re going to have a problem this month and we organize it. But if we can avoid going to tribunals or the court or to anything like that to sort it out, then we will. So right now the tenants agreed that they will go on a payment plan and hopefully things will get back on track. But as a property investor, it’s one of the things I think you have to be aware of – you’ve probably got to consider that maybe this won’t happen or maybe it won’t or work out and then we need to get into a different situation.

Feature Segment

Kaz: Okay, so in our feature segment today, we going to talk about property investment terminology and definitions. We’re going to expose property jargon and help people including ourselves to understand better what these terms mean.

Den: Exactly, one of the things that I hate is when you start speaking to a professional, or someone who is really big in one field, and they use very clever words or whatever and you end up just feeling dumb and stupid as though you don’t belong in the same place as this person. And we want to make sure that anyone listening to this doesn’t have that experience if they’re speaking to a real estate agent, or to a tax accountant or to another property educator, or to whoever. So we’re going to really try and clear up about twelve or thirteen really common terms that are often used as jargon.

Kaz: Yeah and even just to help you in your own reading; if you sit down to read a property investment magazine and every second word you don’t understand that makes it really hard and excludes you from being able to learn. Just understanding these terms can help you in developing your own knowledge as well.

Den: Absolutely, so Kaz what’s our first term?

Kaz: Well our first term is one that is quite common and you may have heard of. It’s called negative gearing. Now negative gearing is a property investment strategy and what it basically means is that the amount of expenses or costs associated with owning a property exceed the income or the profits that are coming in for that property. So for an example, I’ve got some relatives of mine who actually have a house down near the beach and they rent that house out. Now that house costs them round about or $12,000 to $13,000 a year. Now that includes things like their rates and their water services and investment loan interest, but the income that comes in from that house is probably about $7,000 a year. Now quite clearly the costs associated with having that house exceed the income from that house. So that house is negatively geared.

Den: So they make a $6,000 lot from this house…

Kaz: Yes they do…

Den: Right about every year. And why would they didn’t bother with that? Why would they do that? What’s the advantage of negative gearing?

Kaz: Well it’s funny you should mention that Den because actually next week’s episode we’re going to go in there a lot more detail about negative gearing. But just to let you sort of understand the basics of it for today, it’s all about saving tax. Negative gearing the main sort of driver behind people wanting to negatively gear property is that they would save on income tax. But we will go into this in much more detail next week.

Den: Okay so what we’re saying negative gearing is where you lose money on a property and you do it to save tax.

Kaz: That’s right.

Den: Awesome. Now the next one I was going to talk about is positive gearing. Now positive gearing is then the opposite. Positive gearing is when you buy a property that you know is going to make you money straight away. So the reason you would positively gear is because the rent will come in, it will more than cover all of the expenses and you’ll make money straight away. So that’s positive gearing. Now remember though when you’re making money you’re paying more tax. But even after tax and when all those implications are given positive gearing is about making money.

Kaz: That sounds like a good strategy.

Den: I think that’s the best strategy! What’s the next one Kaz?

Kaz: Well the next one is actually what we call positive cash flow property. Now that’s a lot of people use that interchangeably with positive gearing but the way we’re going to differentiate those things are; positive gearing as you said the income exceeds the outgoings. Now with positive cash flow property you actually take into account the tax benefits that you get through depreciation of a property, and what that can actually end up doing is turning what might be a slightly negatively geared house into something that generates positive cash flow for you. So, for example, if you’ve got a house where the income and the outgoings are quite close to each other; I might be, say, $80 a month out of pocket on this particular house. I can depreciate items in that house (we’ll talk about depreciation in the second) – I can depreciate the building and the contents and, and fixtures and fittings and things of the house and what that does it gives me a tax benefit. Now that tax benefit reduces my taxable income and so I end up with more money in my pocket. And that more money might turn that $80 a month loss into $80 a month profit.

Den: Okay so, positive cash-flow is when a tax benefit turns negative gearing property into a money-maker for you.

Kaz: That’s right!

Den: So at the end of the week, you actually have a net positive amount of money in your pocket.

Kaz: Correct.

Den: Okay cool. So depreciation is when you have a claimable expense that’s judged by the tax department according to the amount that the buildings and the fittings in the buildings lose value over time. So you know how when you buy a new car, they always say when you get a car as soon as you drive it out it’s going to lose value. Well the tax department pretty much say the same thing – they say when you build a new house things get older and they going to lose value. When you’re an investor the tax department will allow you to claim this loss in value as an expense. Now with depreciation – there’s a whole show really in depreciation. What we can say is it’s proportional to the amount that the building’s cost and there are certain dates that are important because of different legislations. So what you can claim under depreciation can turn a property that’s losing money into a property that puts money in your pocket. That’s probably the most important thing with depreciation. Alright next one Kaz, let’s get legal, let’s talk about a Section 32.

Kaz: Yes, now funny it should get legal with me because I’m not a lawyer – I just wanted to say that upfront. But a Section 32; this is actually a Victorian term I think, Section 32, but the idea is what we wanted to talk about. A Section 32 in Victoria, is a collection of documents – documents which pertain to a particular property and do things like explain the services to that property; any building or land restrictions or details about the titles and things like that. They give you a lot of history about the block of land, when it was subdivided, and might have some plans of the house and things like that. So it’s a collection of things…

Den: And I think that also includes stuff like rights and outgoings and some of that stuff as well…

Kaz: Yeah exactly. And, and that document must be in place for a property to be sold.

Den: Yeah it actually has to be in place for someone to put an offer in on a property because -we’ve just have that issue, where we’ve needed to wait for a Section 32.

Kaz: Yeah very good! The idea is that a Section 32, if you’re a buyer, gives you a lot of information about the property and you need to get a hold of that. Now as you’ve said legally you must get a hold of that document, and there are equivalents in other states and even in other countries.

Den: Absolutely

Kaz: So even though we’re talking about Section 32 here the, the point is there’s a bunch of information you need to get a hold of about your property and are legally entitled to.

Den: Yeah absolutely. Aright, so that’s the legal documents, the Section 32. The next thing we will going to talk about is Capital Gains Tax or some particularly jargon-friendly people call it. CGT. Now capital gains tax – when you sell an investment and you make a profit on it, that profit is subject to tax. Now there are all different rules about it and about how the tax works but ultimately you can expect that whatever your profit is, once all your costs have been taken out and everything that you’re going to be subject to tax on that. And it may have something to do with your income as well.

Kaz: And there are specific rules around that I mean obviously, as you said Den there’s lots of rules around that?

Den: Yeah

Kaz: And, and you really do need to consult an expert to find out about those rules…

Den: And I’m no accountant, but there are lots of rules about it…

Kaz: And though they’re different relating to whether a house is your principal place of residence, as opposed to whether a house was your investment and things like that…

Den: Yeah I’m pretty sure (look as I say I’m not an accountant) but I’m pretty sure that your principal place of residence is not subject to capital gains tax, and that an investment property is. So capital gains are all about your investment profits, okay. Next one, Kaz.

Kaz: Oh vendor finance is our next thing we wanted to touch on. Now vendor finance is a term you might come across when you’re reading property investing books and things like that. What it basically means is that a buyer and a seller actually engage in an agreement where the seller of the property actually provides finance to the buyer. Vendor finance can take place in a myriad of ways and how that actually works is an agreement for those two parties to come to. So as just an example, I might be purchasing a property with vendor finance terms, where the vendor is going to say okay well we’re happy to take a 10% deposit now but you can pay the rest of it off over, you know, a five-year period at a certain interest rate or something like that. So it’s basically two parties coming to an agreement where the person selling the property is going to finance in some way the buyer’s endeavor to purchase a house.

Den: And yeah that quite often happens if the buyer can’t get finance from a bank, that the buyer and the seller were getting to some arrangement. I don’t know how often it happens but I think that’s one of the driving forces…

Kaz: And interestingly, some people actually use vendor finance as a strategy to make money. So there are people out there who will purposefully seek out buyers, who want to buy a house but don’t have the money, and they will come to arrangements that are win-win for both properties. So some people actually use it as a strategy.

Den: Okay. Aright the next one we want to talk about is equity. Now the equity that you often hear; “use your equity” or “it’s equity mate”…. Equity is all about the value of your property that you actually own. So when you think about how much your property is worth, and whatever your loan is, the equity is the gap in the middle. So it’s a measure of how much you own. And there are certain circumstances in which you can use that proportion for further investments, or to put a deposit on, or to loan against or that sort of thing. So it’s about your net worth and it’s about what you own between your property and the loan, and it can be quite useful for investors.

Kaz: So a lot of people use equity to leverage into further properties, is that right?

Den: Exactly. Well there’s another jargon word, leverage, but equity is about this money that you’ve got which is tied up in your property because it’s not a liquid asset; the money that you’ve got that you can use and maybe loan against that to put a deposit down on another property and that happens quite often. Which ah brings us to the next one; let’s go to LVR Kaz, what’s an LVR?

Kaz: Wow LVR…it’s an acronym that means loan to valuation ratio. You might hear this term when you’re speaking to mortgage advisers or mortgage brokers or your bank about finance. That’s got to do with your loan, pretty much. It’s about how much of a property’s value you are going to loan so for example, if you’re looking to purchase a property and that property is $200,000 and you’re going to put in $40,000 of your own then the loan to valuation ratio there is 80%, so you’re loaning 80% of the value of that property. And so there’s rules around banks and how they want to give you finance and whether you’ll need additional insurance. So, for example, most banks will end up to 80% of the value of a property, but if you want to borrow more than that, they may or may not give it to you and if they choose to they will want you to take something called mortgage insurance…

Den: So insurance of some sort?

Kaz: Yeah

Den: So it’s almost like your LVR is the opposite of your equity?

Kaz: Yeah

Den: The equity talks about what proportion you own out of your property compared to your loan, and the LVR talks about the loan in relation to the value of the property.

Kaz: Exactly.

Den: There you go, perfect. Aright the next one we going to talk about is yield. Yield talks about the amount of rent you get in on a property and compares it with the value of the property. So I’ll give you an example; one of our properties is worth about $200,000 (as I’ve said we’re not investing in diamonds and pearls, we invest in bricks and mortar. So we have a property that’s worth about $200,000). This property brings in about $10,000 a year. This $10,000 as a proportion of $200,000 is 5%. So for this property we’d say the yield is 5%. That’s talking in really simplistic terms and we’re not considering things like depreciation which we’ve talked about and certain other expenses. But if you consider that that’s the amount of money it gets and that’s the loan value then we could pretty safely say yield is around 5%.

Kaz: And so Den, what’s a good yield? Like, if I’m looking and someone says you know, (sometimes you see it on realestate.com or something like that and you’re looking at house and it says), “Wow! 6% yield!”

Den: “Great yield!”

Kaz: What does it mean?

Den: Look, how long is a piece of string? I think it depends on what your strategy is. But I would say if you’re looking at a 5% or 6% yield, that’s probably pretty good. If you’re looking at a 3% yield for a property than you’re looking to make money somewhere other than purely by getting rent in. So quite often if you think about what interest rates are, and if you say well if the yield is somewhere similar to interest rates, you probably going to be on a winner, as far as positive gearing or positive cashflow property goes. That’s probably what you would look for a yield.

Kaz: Nah that’s a good little quick tip!

Den: Aright? So there’s a bit of a tip, I suppose, look at what the interest rates are and see if you can get that as a yield. Okay, now Kaz what’s serviceability?

Kaz: Well serviceability is another one of those terms like LVR that you might hear when you’re speaking to a mortgage broker or a bank and you’re looking at loans. Serviceability is your capacity or ability to pay back the loan. So banks will assess how well you can service the loan before they’re happy to give it to you. Whereas LVR is looking at the proportion of the property that you want to actually borrow, the serviceability is saying well can you actually afford to make the repayments on that.

Den: Okay. So from what I understand when a bank approves a loan, they approve for two reasons: one is that you have enough deposit so that’s your loan to valuation ratio or LVR and the other one is that you can make a repayments, and that’s the serviceability.

Kaz: That’s right.

Den: Aright, there you go. Okay, so that’s a bit of a round-up of some of the most common real estate jargon. We hope we’d managed to clear a few things up for you? We’ve certainly cleared a few things up for ourselves probably as well.

Kaz: And I’m sure there’s lots more terms that people, people might be wondering about. We’re happy for you to email those into us and we will be pleased to put them on another show.

Den: Yeah remember, of course, the disclaimer – we’re not lawyers and we’re not accountants, we’re not bank managers either quite frankly, so we really look to try and put stuff into plain clear language and hopefully it helps you understand.

Quick Tip

Kaz: In today’s quick tip, we just wanted to mention a great place to go and find out some more terminology and definitions if you’re looking for them. At the back of property investing magazines they’ll often have a glossary of terms and you can actually go and look up a lot of the terminology that you might be wondering about. So before when I was talking about how you read that magazine and you can’t understand every fourth word, well usually there’ll be a glossary in there somewhere so you can go and find out those things there. Another great idea is to keep a notebook, just like a little spiral bound notebook or something to do with your property investing, and you can just write the definitions of some of those key terms that you keep hearing in there because no doubt you read the magazine, you might read the glossary definition. Then a few weeks later you come across it again and think what was that again? If you’ve got it written down in your own explanation in your own book, in a way that made sense to you at the time then hopefully when you read it again it will make sense to you again.

Den: Absolutely, and we’ve also got some books on our website that we’ve reviewed and some of them have a great glossary or they go through the definitions really well so it’s worth having a look at them.

(Music)

Action

Den: Okay so the action we’re giving you this episode is to get a property magazine and read through the magazine. Grab yourself a highlighter and highlight the terms that you don’t understand and then make a point of finding out what they are. You can either go to one of the sources we mentioned in the quick tips or jump online to Google and find out what they mean. Now next episode we’ll be going through negative gearing as a property investment strategy. So that’s the first of our jargon terms for today. Negative gearing; we’ll make sure you understand what it means and we’ll look at the pros and cons of negative gearing.

Kaz: So I’m looking forward to that Den. And in the meantime you can email us with any comments or feedback or news or stories you want to share. Email us at comments@everydaypropertyinvesting.com. And next week we’ll also have our usual segments including news and tips so get on over to iTunes and subscribe to the podcast, head on over to the website at www.everydaypropertyinvesting.com and sign up for our email tips and newsletter, until then!

Closing

You’ve been listening to Everyday Property Investing, the show empowering everyday people to create wealth and achieve financial freedom. Please note that this show provides general advice based on personal experiences and is for educational purposes only. We’re not qualified accountants or lawyers or licensed to provide professional financial advice for you. We strongly advise that you employ the services of qualified professionals and seek their advice that is specific to your own personal circumstances. You can visit us at www.everydaypropertyinvesting.com. See you next time!